Apple's lone-wolf strategy backfires

Apple Inc. is a synonym for independence, hipness and originality — but recent setbacks may finally force the icon to rethink its us vs. them mentality when it comes to big battles in Washington and Silicon Valley.

The company marches to its own iTunes, spending little on lobbying, rarely joining trade associations and, in a pattern that’s become more pronounced this summer, refusing to negotiate or settle in many lawsuits.

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Experts say Apple’s tried-and-true approach is starting to backfire, as the company has already taken at least one big hit in a high-profile e-books trial. A recent landmark D.C. appearance by CEO Tim Cook may reflect a new reality for Apple: that direct engagement with lawmakers, regulators and rivals is more effective than trying to remain above it all.

“It’s inevitable,” said a top Washington consultant who works with major tech brands. “Everybody gets a shot at being a fair-haired boy and that can keep the regulators away for a while. But nobody stays favored forever. That’s why you need friends.”

An Apple spokeswoman declined to comment on the record for this story, referring instead to past public statements by Cook and others.

In general, the company’s public remarks can be summed up with a blanket defense of its practices and an insistence that it won’t settle cases in which it considers itself in the right. Apple also rarely brings lawsuits it doesn’t intend to push all the way to trial.

But it has been a rough go of late for the Cupertino, Calif.-based company. Three weeks ago, Apple was found by a federal judge to have orchestrated an e-books price-fixing scheme. The five other book publishers involved settled with the Justice Department, but Apple refused. The company lost at trial and has vowed to appeal.

Apple also appears headed to court in a class-action lawsuit over Silicon Valley hiring practices. Two other co-defendants recently settled.

And later this week, Apple and Samsung expect to learn who has won a patent dispute before the U.S. International Trade Commission. The outlook for Apple is uncertain, given that ITC investigators have already chastised the company for its unwillingness to negotiate a settlement with the South Korean rival.

At his May 21 testimony in the Senate — a moment necessitated by a harsh congressional report about Apple’s offshore tax-avoidance strategies — Cook acknowledged the company’s disengagement from the levers of power.

“While we have never had a large presence in Washington, we are deeply committed to our country’s welfare,” Cook told the Senate Permanent Subcommittee on Investigations in the only Hill testimony by an Apple chief executive in the company’s 37-year history. “We believe great public policy can be a catalyst for a better society and a stronger economy.”

The very notion that Cook felt he needed to do what late founder Steve Jobs never did — publicly mollify Congress and, by extension, the American public — showed that the worm may have turned for Apple.

“They were asked many times to come to the Hill and have a conversation, they were asked to testify at hearings — and they wouldn’t even return phone calls,” recalled Christal Sheppard, chief counsel for patent and trademarks for the House Judiciary Committee until 2010. “It proved to be impossible to get them to come to the Hill to testify.”

Corporate reputation consultant Jonathan Bernstein said it hurts Apple to have “the perception of being a go-it-alone, arrogant corporation.”

“They’re going to pay a price in decisions made against them, whether it’s by litigators or prosecutors or the consumer,” he said.

A more standoffish approach worked well when the company was viewed as a renegade, outsider brand determined not to be tamed or forced into conventional business practices. But now that Apple is among the world’s largest, most valuable corporations and a mainstream fixture, its allergy to all sorts of public interaction comes off badly to many.

In the e-books case, Apple stood its ground and refused to settle with the government even after every co-defendant had done so. A judge found that the company had orchestrated a plan with five publishing houses to set a floor on the price of books sold in the iBooks store created for the iPad’s debut. The judge said Apple had done so to force rival e-book seller Amazon not to undercut the market and that doing so kept prices higher for customers. A hearing on a penalty in the case has yet to be scheduled, but Apple has said it will appeal regardless.